Mark the second week of February, 2013 on your calendar as the date the first signs of selling insanity reappeared, after about an 8 year slumber.

Anyone who’s followed Benicia and Vallejo real estate recently knows that the market has been building fast and furious over the past 8-10 months. Inventory is way down and prices have been on the rise — not only just here in Benicia and Vallejo, but pretty much throughout the entire Bay Area and many other parts of California and the U.S.

Low supply and high demand have always been the perfect ingredients for a blazing seller’s market. So the current market frenzy shouldn’t be considered a surprise.

But up until now, memories of 2007-2011 were still too fresh for sellers to throw caution to the wind. Though they knew the scales had finally tipped in their favor, sellers also knew they still had to price their homes within reason, as buyers would still pay some attention to the comps and those with a mortgage would still need a satisfactory appraisal.

Even though prices are again exceeding recent comparable sales, until now, new listings have largely been priced marginally higher than the most recent sales, with sellers letting the market overbid and boost the price higher if it was warranted. But last week, for the first time I can remember since 2004-2005, we saw the return of what I call “seller insanity,” where homes are listed for sale with seemingly no regard to their condition, location or justifiable comps.

Here in Benicia, where there are only 20 active listings city-wide, several homes recently came on the market that are in my opinion a good $75,000-$100,000 above where they would likely sell. Neither of these homes are “show-stoppers” and both have drawbacks due to location or condition.

A year ago, these same sellers probably wouldn’t have considered pricing their homes so far above the market in their wildest dreams. But with inventory so low and demand so high, I’m sure they reasoned ‘what the heck…let’s give it a try.’

I won’t reveal the addresses of these homes for obvious reasons. And while it’s possible a starry-eyed, desperate buyer may throw common sense out the window and buy one of these homes anyway, I’d say that 98% of today’s buyers would quickly come to the same conclusion I did right off the bat. Which means they’ll probably sit on the market for a long time, unless they reduce their price or the market appreciates considerably.

If these homes had a unique location, lavish high-end amenities or other attributes that justified a one-of-a-kind price, it would be a different story. But that wasn’t the case with either of these homes.

When the market started to heat up last spring, I knew that this day would eventually come. So if you’re keeping score, mark it down — the Second Week of February, 2013 is when Selling Insanity first re-appeared, after about an eight year slumber.

When Congress passed HR 8, otherwise known as the “Fiscal Cliff Bill,” it definitely helped local Benicia, Vallejo homeowners and real estate investors on a number of different fronts. Here are six tax-saving measures that directly affects those who own real estate here in Solano County:

Homeowners currently paying mortgage insurance with incomes below $110,000 will be able to deduct the cost of their mortgage insurance in 2013. The bill also makes the deduction retroactive to 2012.

The 10% tax credit (up to $500) for energy improvements to existing homes has been extended through 2013 and is also retroactive to 2012.

The Mortgage Debt Relief Act of 2007, which expired Dec. 31, has also been extended to the end of this year and made retroactive to cover homes that closed escrow after Dec. 31, but before President Obama signed the bill into law. Of all the provisions in the Fiscal Cliff bill, this is probably the game-saver for the current Benicia/Vallejo real estate market. For it continues to allow many who sell their home in a short sale or lose their home to foreclosure to avoid paying tax on their lender’s loss. See yesterday’s post about the Mortgage Debt Relief Act’s impact on short sale sellers for more details.

When it fine-tuned the capital gains tax provisions, Congress thankfully kept the exemption that allows joint filers to avoid paying tax on the first $500,000 of gain on their principal residence ($250,000 for individuals). That’s another big one, especially here in the Benicia, Vallejo area, where most homeowners selling their primary home to buy another are well under those capital gains tax thresholds.

Without the fiscal cliff bill, homeowners with an adjusted gross income of $174,450 or more would have seen their itemized deductions limited, which could have impacted the mortgage interest write-off for some local homeowners. The bill changes that minimum income threshold to $250,000 (individuals) / $300,000 (joint filers). Those with incomes above the threshold could still see their itemized deductions reduced by up to 20%.

Lastly, Congress also kept the 15-year straight-line recovery period for qualified improvements for commercial real estate investors intact for another year by allowing that 15-year depreciation schedule to continue in 2013 and also making it retroactive to 2012.

All of these provisions are definitely a good thing for those who own real estate here in Solano County. It’s just a shame that Congress couldn’t done all of this a month ago and spared everyone from worrying about the potential ramifications had some or all of these real estate-related tax provisions gone away.

For the last 6-7 months, most sellers contemplating a short sale in Benicia, Vallejo and elsewhere in Bay Area and U.S. saw Dec. 31, 2012 as a very important date. For that’s when the IRS waiver that allowed many short sellers to avoid paying taxes on the amount their lender lost was set to expire.

In recent weeks, everyone in Washington seemed more focused on the looming fiscal cliff deadline than worrying about what the expiration of the Mortgage Debt Relief Act of 2007 would do to those involved in a real estate short sale. But for home sellers unable to make their mortgage payments and with little or no cash in reserve, the prospect of suddenly being hit with a $50,000 tax bill months after completing their short sale was nerve-wracking to say the least.

And that’s exactly what was set to happen at 12:01 am on January 1st.

If you owed $400,000 on a home worth only $250,000 and if your lender agreed to forgive $150,000 in debt so you could do a short sale, without the debt relief act, you’d be responsible for paying taxes on an extra $150,000 in income.

And, if that additional income put you into a 40% tax bracket, you could have been looking at a $60,000 tax bill a year from now.

Well, if you’re upside down on your home and are thinking of doing a short sale in 2013, I’ve got some very good news for you. As part of the American Taxpayer Relief Act of 2012, which was passed by Congress early on New Years Day, the Mortgage Debt Relief Act has been extended one more year — to Dec. 31, 2013.

So if you need to sell your principal residence by doing a short sale in 2013 and qualify for debt relief under the IRS’ guidelines, as long as escrow closes by the end of this year, you’ll be protected from what otherwise would be a huge tax bill. As with any tax matters, be sure to consult your tax adviser to determine how the IRS’ debt relief rules applies to you.

Since Congress only extended the debt relief act one year, at this point, those who wait too long to start a short sale in 2013 could find themselves in the same deadline pickle towards the end of 2013 that late-2012 short sellers experienced.

Thus, if the handwriting is on the wall that you may need to short-sell your home at some point in the next 12 months, my advice is to get started sooner than later. We’ve represented clients on many short sales over the past 5-6 years and know from experience that they can take time. Most short sale lenders have gotten quicker, but they can still take months to complete.

Those who start a short sale in the first quarter of 2013 in most cases should easily complete the process well before the end of 2013. But if the market should slow to where homes take longer to sell later in the year and the Dec. 31, 2013 deadline is staring you in the face — along with a $50,000-plus tax bill — you’ll definitely wish you had started the process months earlier.

If you’re having a hard time making your house payments and may need to consider a short sale in Solano, Contra Costa or Southern Napa counties in 2013, please contact me to schedule a confidential no-obligation appointment to explore your options.

Well, over the weekend, I got an email from someone who recently relocated to Benicia, who was looking for suggestions on the best fireworks-watching locations in town without hordes of people.

So naturally, that prompted me to take a drive around Benicia yesterday to find some fireworks-watching locations away from the crowds and congestion of First St. and the Marina.

The goal: to find locations with unobstructed views of the skies above fishing pier at the foot of First St., which is the usual fireworks launch site.

Views from Overlook Park, between Seaview Dr. and Olive Branch Ct.

Below is my list of some lesser-known fireworks viewing spots in town. Some have limited or no parking, so you might have to park nearby and walk a little. It’s always a good idea to get there early rather than waiting til close to dusk. If you have a favorite fireworks viewing outpost of your own and are willing to share (I know…some folks are pretty protective of their secret viewing area), please comment at the end of this post.

10 Lesser Known Benicia Fireworks Venues

1. Panorama Drive, between Baker St. and Merlin Ct. If you want to avoid traffic and crowds and watch fireworks from your car, this location, in the heart of Southampton may be The place.

2. Woodgreen Way. Take Chelsea Hills to Ardmore to Woodgreen Way. Woodgreen dead-ends just above Sunset Circle. There isn’t much parking there, but if you’re an early-bird, you’ll have great views. Read the rest of this story

Gov. Brown Signs New Anti-Deficiency Law

A long-awaited bill preventing lenders from going after borrowers with a second mortgage for the difference after the completion of a short sale was signed into law as an emergency measure by Gov. Brown yesterday, which means that it goes into effect immediately.

That should come as welcome news to short sale sellers in Benicia and Vallejo as well as the rest of California.

In January, a new law went into effect offering protection from a deficiency judgment on a borrower’s first mortgage after a short sale. But until yesterday, that same protection didn’t apply to the lender of a second (or other “junior” mortgage).

The new law (SB 458) prevents lenders from going after the borrower for any repayment once the short sale has been completed, regardless of whether it’s a first, second, third or umpteenth mortgage.

That’s a huge victory for short sale sellers, for while many first mortgage holders often are very cooperative, it’s usually the second lender that becomes a thorn in the seller’s side. Read the rest of this story

A lot has happened in my Benicia garden since my last update. Now that the unseasonably cool and wet weather seems to at long last be behind us, all of my warm-weather loving plants are now really starting to take off.

The tomato plants have plenty of new growth and are all flowering. Most of the plants are now almost 2 feet tall. And some of the plants have stalks are a good inch in diameter. I haven’t yet found any little baby tomatoes, but I’m hoping they’ll start appearing in a matter of days. I did have two tomato casualties since my previous garden update. My Black Prince and Costoluto Genovese plants started wilting and I had to give them a proper burial (in the green-waste bin). Fortunately, I still had another seedling of each variety, so I replanted them about 3 weeks ago. So far the deceased plants’ siblings seem to be doing well. Read the rest of this story

Unless Congress steps in soon, some Benicia, Vallejo homebuyers may find it impossible to get an FHA or conventional loan by early Fall.

That’s because loan limits for the two loan programs that cover probably at least 90% of the loans originated in Solano County are set to change come Oct. 1.

And barring Congressional action, the maximum you can borrow under both programs is going to drop substantially, which means that many Benicia, Vallejo and Solano County home buyers could suddenly find themselves needing to come up with tens of thousands more in down payment or accept a costlier “jumbo” loan.

Right now, the maximum you can borrow with an FHA or conventional loan is $557,500. But as it stands right now,after September 30, the conforming loan limit in Solano County will drop to $417,000 and the FHA limit to $400,200, which is certain to impact local borrowers who are planning to finance a home with a loan amount that exceeds the new limits.

In plain English, that means that any borrower in Solano County who is today planning to buy a home for more Read the rest of this story

It’s been about 2-1/2 weeks since I planted my tomatoes, peppers and other summer garden veggies and so far, with one or two exceptions, things are going well.

If you read the earlier posts about my garden, you know that between myself, Richard Bortolazzo and a few other friends in Benicia, we nurtured and gave away over 400 tomato, pepper and cucumber plants, all of which we started from seeds earlier this spring.

We put our seeds in the starter kits on President’s Day back in February, transplanted them into individual peat pots in mid-March and started distributing them to friends and co-workers in late April.

I planted mine in Earthboxes on April 28 — 10 different varieties of tomatoes, five varieties of peppers, and a few straggly cucumber plants. I also planted some nursery-bought seedlngs: Japanese eggplant, bunching onions, a tomatilla plant and a backup 6-pack of pickling cukes. Plus I refreshed my herb garden with new basil, cilantro, Italian parsley, sage, fennel epazote, and dill.

So it’s now 18 days since I planted and most everything is going well. Nine of my 10 tomato plants are very robust and pushing skyward. The 10th Read the rest of this story

It’s been 11 days since I planted this year’s tomato crop and so far all’s well on the veggie front. All 10 home-grown heirloom tomato seedlings seem to be doing well — they’ve each grown about 6-8 inches in about a week and a half. All but one variety are now about a foot tall.

More importantly, they’ve seen just about all nature can throw at them — a few blistering hot days last week followed by a little rain and cold, gusty winds.

The calendar may say that spring arrived a month ago, but I say it’s not officially Spring until the Benicia Farmer’s Market opens.

And today was opening day for the 2011 market, which means that at long last, Spring is finally here. At least that’s the way I see it.

There’s something extra special about Opening Day — whether it’s a sporting event, a theatrical production or the Farmer’s Market. Everyone has a little extra bounce in their step and a little broader smile on their face. And that’s how it was today as farmers, merchants and shoppers all welcomed each other to the 2011 market season. Read the rest of this story